Mutual Funds See Best Monthly Inflows in Two Years

That marked an increase from January, when investors put a net $37 billion into long-term funds, according to Strategic Insight (SI), an Asset International company. February’s results were the best monthly net inflows for long-term mutual funds since March 2010, when long-term funds (excluding ETFs and VA funds) saw $49 billion in net inflows, SI said.   

In February, domestic equity funds saw net inflows of nearly $4 billion, during a month when the average U.S. equity fund gained 4% on an asset-weighted basis. The net inflows to domestic equity mutual funds in both January and February (totaling roughly $5 billion) was the first time U.S. equity funds enjoyed net inflows in two straight months since March-April 2011 (when U.S. equity funds drew a combined $6 billion in net inflows). Illustrating investors’ caution, February’s U.S. equity inflows were led by equity income funds, with nearly $3 billion of net inflows.   

International and global equity funds saw net inflows of more than $6 billion. The leading categories were emerging markets equity funds ($3 billion in net inflows), which gained an average 5.8% in February on an asset-weighted basis, and global asset allocation funds ($2 billion), which gained on average an asset-weighted 3.5% in the month. February was the second straight month where these two categories led the way in international/global equity fund flows.  

Taxable bond funds saw net inflows of $30 billion in February, as investors continued to use bond funds as income-producing alternatives to money market funds, CDs and bank deposit accounts. Leading the way were intermediate-term bond funds ($9 billion in net inflows), corporate high-yield bond funds ($5.5 billion), and mortgage-related bond funds ($3 billion). Muni bond funds enjoyed net inflows of $6 billion, as fears of widespread municipal defaults continued to fade.   

Money-market funds saw net outflows of $3 billion in February, which was an improvement over January’s net outflows of $43.7 billion. Ultra-low yields continued to hamper demand for money market funds – a trend that resulted in net outflows of $135 billion from money funds in the full year 2011.   

“Memories of extreme volatility are fading, albeit very slowly, as U.S. mutual fund investors are tiptoeing back into riskier assets. That’s why we have seen more fund shareholders choose to participate in financial markets via bond funds,” said Avi Nachmany, SI’s director of research.  

More information is available at http://www.sionline.com.